Monday 9 January 2012 05.00 EST
First published on Monday 9 January 2012 05.00 EST

David Cameron is to take a high-stakes gamble with the union this week by telling the Scottish first minister, Alex Salmond, he can have a binding referendum on Scottish independence – but only in the next 18 months, after which any referendum can be no more than advisory.

He is also likely to tell Salmond he will be forbidden from asking a third question on the ballot paper, over a form of devolution stopping short of independence.

Cameron will publish a consultation paper, probably this week, revealing clear legal advice that the independence referendum will be binding under the Scotland Act only if both parliaments agree to its going ahead. He will say the uncertainty created by the prospect of independence is harming the Scottish and UK economies, and a delay until 2014 is not possible.

Salmond then faces the choice of staging the referendum by the middle of 2013 or backing off until the next parliament. It would also be open to him to challenge Cameron's legal interpretation in the courts.

The prime minister said that the uncertainty surrounding Scotland's future was "very damaging" for businesses. Speaking to Sky News on Monday, Cameron said: "If Alex Salmond wants a referendum on independence, why do we wait until 2014?

"It is at least rational to put to the Scottish people: would it be better to have a more fair and decisive question put earlier?"

He said Scotland was better off inside the UK. "But we can't stand in the way of a part of the UK if it wants to ask the question: are we better off outside it? We can't stand in the way of that. But … I think what the Scottish people deserve is a fair, clear and decisive question."

Scotland's deputy first minister, Nicola Sturgeon, told BBC Radio 4's Today programme Cameron's move represented a "blatant attempt to interfere in a decision that's rightly one for the Scottish people".

The power of the Scottish parliament to hold a unilateral advisory referendum is disputed by constitutional lawyers. Tories claim Salmond has been talking about holding a referendum to coincide with the 700th anniversary of the battle of Bannockburn in 2014.

One government source said: "We are not going to allow this issue to be decided on the basis of a rigged debate organised by Salmond. It is going to be a fair debate.

"It's very unfair on the Scottish people themselves, who don't really know when this question is going to be asked, what the question is going to be, who's responsible for asking it. We owe the Scottish people something that is fair, legal and decisive. So in the coming days we'll be setting out clearly what the legal situation is, and I think we need to move forward and say, 'Right, let's settle this issue in a fair and decisive way'."

The Scottish government has insisted it should determine the timing and form of a referendum. There is no agreement yet whether the Electoral Commission would oversee the referendum, as it does in England, especially if it is advisory.

Salmond said: "The position is very clear – the Scottish government achieved an overwhelming mandate from the people of Scotland to hold the referendum in the second half of this parliamentary term, and that is exactly what we will do."

Sturgeon said that the Scottish government "will stick to our promise" made in the last election. "Westminster is trying to dictate conditions so that they can decide the timing, the wording," she added.

Cameron told the BBC the position of the Scottish government was a deliberate attempt to influence the result of any vote.

He said: "I think what Alex Salmond is trying to do – I think he knows the Scottish people, at heart, don't want a full separation from the United Kingdom – and so he's trying to sort of create a situation where that bubbles up and happens. Whereas I think we need some decisiveness, so we can clear up this issue."

The Treasury chief secretary, Danny Alexander, agreed with Cameron, saying Scottish business could not tolerate the delay. The Scots Tory peer Lord Forsyth, who is leading the campaign to preserve the union, said: "The idea that we should decide the fate of the UK on the basis of the date of a medieval battle when we are in the middle of a financial crisis and youth unemployment of one in four would be laughable if it wasn't so serious."

An 18-month deadline would put pressure on anti-independence parties, including Labour, to reach agreement on how they would conduct a cross-party campaign, if at all. There has been talk of first holding an advisory referendum, which would lead to detailed negotiations on the terms of a break-up that would then be put to the Scottish people in a binding vote.

The anti-independence parties have failed to find a figurehead to lead the fight to stay in the UK, with a number of senior figures including John Reid, the former Labour defence secretary, publicly stating that they do not want the job. Former Labour Scottish secretary Jim Murphy, now shadow defence secretary, has also been mentioned.

Two recent polls have suggested that independence still has only minority support, though it is increasing. The Scottish Social Attitudes Survey showed that backing for a split with the rest of the UK was at a six-year high of 32%, nine points up on last year.